HIGHER NICKEL COSTS TO PUSH UP STAINLESS STEEL PRICES

Nickel’s price surge continues, creating fresh headaches for participants in the stainless steel market. In London Metal Exchange trading in the last week of April, nickel prices reached a peak of $US20,000 per tonne.

Some observers attribute nickel’s soaring price to a physical shortage of metal. Demand is increasing because of the rise in stainless steel production and higher consumption of nickel-base alloys by the aerospace sector. At the same time, nickel supply is being restricted by unexpected shutdowns at a number of producers. Labour disputes are threatening to disrupt some nickel companies’ production later in the year.

But this talk of shortages goes against the experience of some stainless steel mill purchasing officers, who say they are not experiencing any difficulty in obtaining metal. They see the price being driven – not by the normal issues of supply and demand – but by commodity fund investors and speculators.

Whatever its cause, the high nickel price is a reality and other stainless steel production costs are also rising. In ferro-chrome, the oversupply that kept a lid on prices is easing, and contract prices are about 10 percent higher for the second quarter. Energy costs are another worry for stainless melters. Alloy surcharges at European stainless mills have increased each month since February this year. With the latest leap in nickel, the immediate prospect is for further sharp increments in alloy adjustments.

Stainless steel purchasers are looking to buy in more tonnes than they need for immediate requirements. This will accelerate the restocking – by both distributors and end-users – that has already been under way since the first quarter of this year.

But nickel, having risen so sharply, could drop back just as fast. In this case, de-stocking could resume. Buyers will not want to be caught holding excess tonnages in a falling market. Mills may find that, in the latter part of this year, they will have to keep their production rates in check if they are to avoid oversupplying the market.

Source: MEPS - Stainless Steel Review

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